1/31/10 currencies vix bonds

When we last discussed Bonds, we became decidedly neutral. That position was correct and the bonds have rallied a few points. There was good support at 118 with a count of 4. This gives a minimum objective of 122. 6 across 119 gives 125 and of course the 14 across 117 gives 131. If I have time I will post a count of the yield.
I believe this is one of the most bearish charts out there and is well worth following closely. For starters there are 11 points across the 166 line giving a target of 155 and should that not hold feel free to keep counting across the 166 line. The most conservative count of 7 @166 was accomplished at 159.(The 7 begins above the / in 11/3). We then had 3 at 160 (ox1) beginning at the 1 in 12/29. This was accomplished at 163 and kept the pound in the lower half of its trading range, a sign of weakness and a signal that we could break down on the next test of the lows. We now have 4 at 161 yielding 157. That breaks the low of the trading range and further activates the huge counts. This is a 7 month range of distribution which if played out calls for the pound to lose 41 points or 25%of its value.
The problems of the Euro are now well known. I for one do not believe that France and Germany will bail out Greece or the other Eurozone states in trouble. After watching the moral hazard US bank bailouts created, they have probably learned something. After all such a bailout would be a stealth bailout for their own banking systems.

Enough opinions, the count for the Euro is now 20 at the 144 line for a target of 124. We are about half way there.

In my last discussion of the VIX I said we were on the hinge, implying the possibility of a large sharp move. Such move occurred moving up more than 50%. Such is the power of Wyckoff. From the peak the vix reacted about 50% a normal reaction. More importantly notice how tight the bars on the reaction are. This often is a sign of tremendous support and sharply higher prices can be expected.

1/29/10 Indexes

Again I apologize about blogging so infrequently. Around January 18 our two trend lines are approaching an apex. This tells us that something might happen. Hopefully it will be a sharp move one way or the other. As the volume and ranges have been larger on declining days since the 11th one would guess the break will be down. On the 20th breaking the lower(blue line) boundary of our little trading range is another indication. Most importantly, that up down movement within a narrow range is a sign of large players selling and getting short, while at the same time supporting the market. The little break of the 20th then means they could not keep it in the range. Inability to rally to the upper half of the range on the 21st emphasizes the weakness and seals the fate of the index. As the buyers in our little range above 113 or so are filled up, offerings are pressed on the market and buyers who are waiting for a dip are filled up as well. We now have ease of movement and the line of least resistance is down. On 1/27, the market finally finds some support at about the horizontal red support line and we expect a rally back around 50% of the move from the top. This buying is filled up as well, 1/28 and 1/29 with the market closing near its lows on heavy volume. That support around 108.19 is broken as well. That the normal rally did not occur tells us the sellers are in a hurry and I believe adds to the bearish tone. Because the selling is so heavy I believe we have seen all we are going to see of the normal correction, that should have taken place.

While the flattening of the point and figure shows the support around 108-110, it also shows the inability to rally. The count of 7 horizontally at 114 gives a target of 7 boxes lower 114-(7x.76) points per square or 108.68. The conservative count of 7horizontally at 109.44 gives a count of 104 should we continue down. In view of the heavy volume selling described above, we should also count across the 110 line for about 30 horizontal boxes, which yields a target near the low on the chart. We have three months of distribution, and we are going to move.

On the hourly I only want to make a few points. On the 27th at 108.33 you can see clear evidence of a temporary bottom. The first bar on the 28th(110.25) the close was near the low and the volume shrunk. There was no follow through. The market surprised me among others and ran out of buyers. The sellers did not let the market float up on lack of buying but even less selling as we saw so many times in the past, but they wasted no time in selling it down sharply to 107.91. In the ensuing rally, ignore the misprint to 109.86, the two bars which had closes in the lower half of their range had the highest volumes. Again it sold off sharply after a lower high at 109.75. In other words not only are the sellers aggressive and in a hurry, but the demand is weak. No rally from support expected as of yet.
Please notice how the rallies for the most part are more like hesitations and stay within the range of the preceding strong down bar. This in my experience is most characteristic of a move that is beginning and not one that is in the middle or ending.

1/17/2010

Due to a change in my work responsibilities, I have not been able to watch the markets as much or to blog. Anyway, like Mr Wyckoff who had a similar situation, I have to rely more on the point and figure chart and I have tossed out a bunch from the 100 I follow.

When last discussed I said I believed that the long trading range was distribution. I still believe that because the advance from 12/18 on was struggling with little ease of movement compared to previous advances is this very great bull market. If this had been months of absorption one would expect that on breaking into new high ground it would have been like a dam bursting and the market would have shot higher and not struggled to eek out less than 3%. We have now flattened out into another trading range with a count of 8 across the 1147.8 line which would if realized bring us back to the point of breakout.
I ended up tossing in a few banks. In no small part it is because they are in the news so much. In the midst of this great year, Wells Fargo has not moved since August. It looks like distribution and with a count of 16 on the 29 line I am projecting a halving of its price.
I was enormously bearish the long Bond but have change my position to neutral. The Short bond trade was getting crowded, as opposed to when we first put it on and we now have a very long line of support at 89. Prudence is the watch word here and I will watch.
JPM has not moved since August and is now at some kind of hinge. I do not believe it will make it to its count of 6 across the 42 line and the bearish counts are relatively huge. We have rallied enough in January to shake out the early shorts, so lets see what happens. By the way much of this January rally occurred while yield curve was steepening to its steepest in decades which means income to the banks. A top in JPM then goes along with a rally in TLT.
The chart of the yield on the 30 year bond supports the above. Notice the very playable hinge at 47.15. That was your signal to leave.
Although the problems of Greece and the Euro are very well known, this chart can turn very ugly. My initial count of 9 @150 called for a move to 141. Notice the hinge at 150. Since hitting support at 142 this market has been unable to rally even 50% of its very sharp loss. This is a sign of weakness and the count can start increasing substantially, across the 144 line for example.
Another giant bank. Wyckoff would call the trading range after the peak distribution after a high.
After a long consolidation between 187 and 208, Apple broke out, made a new high by 6 points,hinged at 212, and fell back into its range. That reaction of less than 50% of the preceding gain was a sign of strength, but the inability to then march on to new highs is not. It is a warning to watch carefully if not run.
We are on a hinge after a shakeout, watch very carefully.
Nuf said about interest rates.